UPDATE 1-Brent rises above $115, tropical storm threatens supply

August 26, 2012|Reuters

* Oil supported by hopes of more stimulus measures by the Fed

* Norwegian oil services workers break off wage talks

(Adds details, updates prices)

By Jessica Jaganathan

SINGAPORE, Aug 27 (Reuters) - Brent crude rose more than a dollar on Monday to above $115 per barrel on supply worries as Tropical Storm Isaac threatened to interrupt most U.S. offshore oil production in the Gulf of Mexico.

Hopes for further stimulus measures from the Federal Reserve to shore up the U.S. economy, which would boost the outlook for demand from the world's top oil consumer, also added to gains in crude prices.

Investors are now waiting for the annual U.S. Jackson Hole meeting of central bankers and economists later this week, where Fed Chairman Ben Bernanke will deliver a speech that will be scoured for clues on a third round of quantitative easing.

Brent crude futures rose $1.54 to $115.13 a barrel by 0231 GMT, after rising to a high of $115.50 earlier in the session. U.S. crude was up $1.36 to $97.51.

Oil prices fell on Friday after a report that the International Energy Agency is likely to tap strategic oil reserves as soon as September, dropping its resistance to a U.S.-led plan.

"The markets are now getting excited on the possibility of additional monetary stimulus by the Federal Reserve," said Ben Le Brun, a Sydney-based market analyst at OptionsXpress.

"I don't think traders will want to be caught short ahead of the Jackson Hole meeting especially when there's an upside risk."

Supply worries due to the threat to U.S. offshore oil production in the Gulf of Mexico from the Tropical Storm Isaac also supported oil prices.

Isaac, which lashed south Florida with winds and heavy rain on Sunday after battering the Caribbean, is expected to strengthen to a Category 2 hurricane and hit the Gulf Coast somewhere between Florida and Louisiana at midweek.

Meteorologists at Weather Insight, an arm of Thomson Reuters, predict the storm will spur short-term shutdowns of 85 percent of the U.S. offshore oil production capacity and 68 percent of the natural gas output.

The Gulf of Mexico accounts for about 23 percent of U.S. oil production and 7 percent of natural gas output, according to the U.S. Energy Information Administration.

About 30 percent of U.S. natural gas processing plant capacity and 44 percent of the country's refining capacity also line the Gulf Coast, the EIA said.

Another potential threat to supply looms after Norwegian oil services workers broke off wage talks with oil companies on Friday, taking the sector a step closer to its second strike within two months.

An upcoming maintenance-related drop in North Sea output and ongoing Middle East turmoil also supported Brent prices.